Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation of the first link on one memorable day.
Today, I believe, will be a memorable day.
Ms. Yellen is testifying before Congress but it will not be her testimony that will be the center of our focus soon. Today, in my opinion, will mark the last link of the chain of academicians and economists who ran the central bank of the United States. Today is the final act.
Today marks the moment of departure.
Mr. Trump has three slots now to fill at the Fed. Perhaps more, soon. They will be filled, in my estimation, by businesspeople. This will end a decades old tradition of professorial types and usher in a new era of a much more pragmatic Fed that I also think will be dedicated to the "America First" banner. Liquidity swaps and currency swaps and the Fed acting as the world's central bank will be a much curtailed endeavor in the coming days, in my opinion. "America First," you know, has a second meaning.
I caution those of you that are making projections and setting up your portfolios relying upon the Fed and their dot-plots and what they say today. All irrelevant now, in my view. All worthless pieces of data because the institution that we have known will soon no longer exist. It will still be the "Federal Reserve Bank" but the title will be about all that is left.
That was the thing about the world: it wasn't that things were harder than you thought they were going to be, it was that they were hard in ways that you didn't expect.
The futures' markets are expecting two to three rate hikes this year, depending upon what data you use, and I think this will turn out to be a fantasy. The soon to be newly formulated members of the Fed will engage in no such chicanery. The "normalization" that will be spoken of today will be the "history" that will be recalled soon enough. Ms. Yellen's testimony today will provide no direction, zero direction, of what will happen tomorrow and while the Press will pounce upon her every word, as usual, I suggest dislocating yourself from the experience.
Realize the past no longer holds you captive. It can only continue to hurt you if you hold on to it. Let the past go. A simply abundant world awaits.
Many of you are going to scurry around and buy and sell equities and debt based upon what Ms. Yellen says today. That will be a mistake, I believe. It may even turn out to be a grievous mistake.
Your expectations will be out of line, in my opinion, with our forthcoming reality because Mr. Trump and Mr. Mnuchin will want to keep interest rates low as they try to enhance the American economy. Consequently, the people that will be appointed to the Fed will be Doves easily agile enough to outfly the Hawks.
The Hawks, in fact, if I am correct, will soon be shoved off of their perches and released into the pasture. They will be out. The Hawks will get prodded out of the coop.
Timing, as always, is everything, and it will be interesting to see if all of this begins to take place before the Fed's March meeting. I expect that it will as Mr. Trump will not want to witness any rate hikes just as he is re-engineering America's budget.
Much of the talk of higher interest rates rests upon the assumption of politics as usual where spending programs are not off-set with other cuts in the budget. The people now running "America Incorporated" are not that simplistic, in my view, and I think this assumption is faulty.
Any notion, whatever your politics, that Mr. Trump and Mr. Mnuchin do not know how to read a balance sheet would be a very wrong notion, in my opinion. These people know how to run a business and America, in my estimation, is going to be run as a business. Therefore bets made predicting significantly higher yields will be very bad bets, very bad, and that is where I stand.
There were two ways to be happy: improve your reality, or lower your expectations.
I suggest that you do both!